Standard and Poor’s followed Moody’s in warning it would cut U.S. credit rating if the government doesn’t raise its debt limit.
This time the impact on the Dollar wasn’t as strong as the Moody’s warning since the markets already discounted this fact. A sell-off in USD was short-lived though. Following the announcement USDJPY was headed for its biggest weekly drop three months. The greenback headed for a second weekly loss against the Swiss franc.
However, during the Asian trading session, the Dollar began to steady as investors bought back the U.S. currency as they shifted their focus to stress tests on European banks, with results coming out tonight at 16:00 GMT.
“The impact from S&P’s move is very limited. Obviously, it’s not great for the dollar, but contrary to what many people think, it’s not such a grave development,” said Osamu Takashima, chief forex strategist at Citibank in Tokyo.